Economy Watch: Beige Book Sees Housing as Bright Spot

The Federal Reserve released the latest edition of the Beige Book on Wednesday, more formally known as the "Summary of Commentary on Current Economic Conditions by Federal Reserve District," which noted that the U.S. economy has been growing "gradually in July and early August across most regions and sectors."

The Federal Reserve released the latest edition of the Beige Book on Wednesday—more formally known as the “Summary of Commentary on Current Economic Conditions by Federal Reserve District”—which noted that the U.S. economy has been growing “gradually in July and early August across most regions and sectors.” The term “gradually” is a downgrade in adverbs for the Fed, which has in recent Beige Books has said the nation’s economy was growing “modestly” or “moderately.”

Commercial real estate market conditions “held steady or improved in nearly all districts in recent weeks,” according to the report, which is a cheerful note in all the gradual-growth malaise. Even better conditions are being reported for residential real estate by the Fed’s districts: “Housing markets across most Districts exhibited signs of improvement, with sales and construction continuing to increase,” it said.

Declines in housing inventory levels were reported in Boston, New York, Philadelphia, Atlanta, Dallas, and San Francisco districts, and these declining inventories put some upward pressure on prices according to Boston, Atlanta and Dallas. A reduction in the stock of distressed properties was mentioned in New York, Richmond, and San Francisco. “In general,” the Beige Book explained, “outlooks were positive, with continued increases in activity expected” for most residential markets.

Pending home sales up

The National Association of Realtors said on Wednesday that its Pending Home Sales Index, which is based on residential contract signings but not closings, rose 2.4 percent to 101.7 in July from 99.3 in June, and is 12.4 percent above July 2011, when it stood at 90.5. This is the highest level for the index since the expiration of the federal homebuyer tax credit about two years ago.

Limited inventory is constraining market activity, according to NAR, agreeing with the Fed on the fact that inventories are tight in some places. “All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage,” Lawrence Yun, the organization’s chief economist noted in a press statement.

NAR further predicts that existing home sales will rise 8 percent to 9 percent in 2012, followed by another 7 percent to 8 percent gain in 2013. The organization also optimistically forecasts that home prices are expected to increase 10 percent cumulatively over the next two years.

U.S. 2Q GDP revised up

The Bureau of Economic Analysis released its revised its estimate for second quarter 2012 U.S. GDP on Wednesday, upping it slightly to an annualized 1.7 percent from 1.5 percent. Among other things, consumption of services was revised up, though investment was revised down, as were imports (which is a subtraction from GDP). On the whole, these were minor revisions, and growth remains tepid.

Wall Street barely moved at all on Wednesday, consistent with the rest of the week so far, as investors seem to wait for word from Jackson Hole. The Dow Jones Industrial Average was up a lilliputian 4.49 points, or 0.03 percent, while the S&P 500 gained 0.08 percent and the Nasdaq advanced 0.13 percent.